Dr Charles Tannock

Member of the European Parliament for London

Argentina oil company nationalisation 'first big test' for EEAS

Public Service Europe - 19 April 2012

All member states and the EU's diplomatic corps must stand firmly alongside Spain to show Argentina that such behaviour 'does not pay' and trade links will be critically damaged - says MEP

At first sight, the proposal by Cristina Fernandez de Kirchner's government to seize YPF, the Argentine subsidiary of the Spanish oil company Repsol, seems either politically desperate or a serious error of judgment. But this is far from a laughing matter and it is potentially a test of the European Union's standing in the world. It could be seen as the first major economic challenge faced by Catherine Ashton's European External Action Service - the EU's reworked, re-branded and very expensive diplomatic corps.

European countries are used to having their assets menaced or expropriated by Latin American regimes with authoritarian tendencies and a strong taste for populism. For some time it has seemed that anyone investing in Ecuador, Bolivia - or, above all, Hugo Chavez's Venezuela, might be better advised put their money in Greek bonds. Argentina, though, has traditionally regarded itself as the most European of Latin American states - notwithstanding its bizarre and self-harming addiction to Peronism, its periodic sabre-rattling over the Falkland Islands and its fiscal irresponsibility. Despite all of these worrying symptoms, European investment has been forthcoming for Argentina; attracted by its mineral and agricultural wealth, educated workforce and strong regional-growth expectations.

The YPF story will shatter those hopes and expectations of Argentina. There have been some disturbing signals in the run-up to this outrage, not least the imposition of outrageous tariffs and the alleged manipulation of inflation statistics - and a political campaign in the press against the company. But the latest, the nationalisation of YPF, is of a different order altogether. What can we do? First of all, the United Kingdom and all other EU member states must stand firmly alongside Madrid. This is an appalling time for such a thing to happen to Spain. Given the parlous state of the Spanish economy, this is like stealing food from a starving man.

Second, the EU with support from the member states governments and their bilateral embassies has to apply its full collective weight. And the many officials in the Buenos Aires EU delegation need to deliver. Argentina must be made to change tack or feel the diplomatic consequence. Argentina is negotiating, as part of the regional free-trade bloc Mercosur, a free trade agreement with the EU. It also benefits considerably from the general system of preferences arrangements for exporting goods to Europe. These can be suspended for breaching trading norms, which Argentina has been doing for some time by imposing restrictive trade practices such as non-tariff barriers on EU imports. Europe has hitherto ignored or tolerated these, including most egregiously political pressure on local companies trading with the UK as a means of sanctions against the British for possession of the Falklands - and the oil exploration companies operating there.

Finally, we need to stop the rot in Latin America by pointing out that the actions of Argentina endanger inward investment across the whole continent. Make no mistake, this should be a major test of the EU's moral and political clout. The takeover of YPF is nothing short of expropriation and President Fernandez de Kirchner must be shown that confiscation does not pay.

Charles Tannock MEP is spokesman on foreign affairs for the European Conservative and Reformists group in the European Parliament.